Solutions Manual For Accounting Essentials For Hospitality Managers 4th Edition, (2022) By Chris Guilding, Kate Mingjie Ji| All Chapters 1-16

Solutions Manual For Accounting Essentials For Hospitality
Managers 4th Edition, (2022) By Chris Guilding, Kate Mingjie Ji|
All Chapters 1-16)
Solutions – Accounting Essentials For
Hospitality Managers (4rd Edition)

CHAPTER 1
Introduction
Problem 1.1: Solution

a) Functional Interdependency Exists When The Performance Of One Functional Area Is
Affected By The Performance Of A Separate Functional Area. For Example, In A Hotel
Complex That Is Dominated By A Casino, The Success Of The Rooms And Food And
Beverage Departments Will Be Affected By The Success Of The Casino Operations In
Attracting Clients To The Complex.

b) Functional Interdependency Is An Important Issue For The Designers Of A Hotel’s System
Of Accountability Because Care Should Be Taken To Hold A Manager Accountable For
Only Those Aspects Of The Hotel’s Performance That He Or She Can Influence. For
Example, The Heads Of Rooms And Food And Beverage Departments Should Not Be Held
Accountable For A Decrease In Their Room Sales If It Is Caused By Reduced Casino
Activity.


Problem 1.2: Solution

a) The Four Main Dimensions Of Sales Volatility In The Hotel Industry Are:
1. Economic Cycle Induced Sales Volatility,
2. Seasonal Sales Volatility,
3. Weekly Sales Volatility,
4. Intra-Day Sales Volatility.

b) The Implications That These Dimensions Of Sales Volatility Carry For Hotel Accounting
Systems Are As Follows:
1. Economic Cycle Induced Volatility: Hotel Sales’ High Susceptibility To General
Economic Conditions Highlights The Importance Of Hotels Carefully Forecasting
Economic Cycles As Part Of The Annual Budgeting Process.
2. Seasonal Sales Volatility: Three Accounting Implications Arise:
• Seasonal Sales Volatility Can Be So Severe To Warrant Temporary Closure For
Some Resort Properties. This Possibility Of Having To Make A Closure Decision
Signifies That Cost And Revenue Data Should Be Recorded In A Manner That Will
Enable A Well Informed Financial Analysis Of The Pros And Cons Of Closing.
• Seasonal Sales Volatility Can Also Pose Particular Cash Management Issues. During
The Middle And Tail-End Of The Busy Seasons, Surplus Cash Balances Are Likely
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,To Result, While In The Off-Season And The Build Up To The Busy Season, Deficit
Cash Balances Are Likely To Result. Careful Cash Budgeting Will Therefore Need
To Be Conducted.




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,Accounting Essentials for Hospitality Managers (C. Guilding) Solutions



• Seasonal Sales Volatility Will Also Affect Price Discounting Decisions. To Ensure
Such Decisions Are Well Informed, Careful Forecasting As Part Of The Annual
Budgetary Process, Will Have To Be Conducted.
3. Weekly Sales Volatility: Accurate Forecasting Of Weekly Sales Volatility Will Inform
Management’s Decision Making With Respect To The Amount And Timing Of Room
Rate Discounting, Staffing Needs As Well As Restaurant Purchasing Needs.
4. Intra-Day Sales Volatility: Intra-Day Demand Volatility Has Led To Widely-Used
Pricing Strategies Such As “Early Bird Specials” In Restaurants And “Happy Hours” In
Bars. Records Concerning Demand At Different Times Of The Day Will Have To Be
Maintained In Order To Inform Such Hotel Pricing Issues.


Problem 1.3: Solution
Examples Of Business Decisions Requiring The Use Of Financial Accounting Data Include:
(a) A Bank Manager Deciding Whether To Lend Money To A Company.
(b) A Shareholder Deciding Whether To Sell Her Shares Due To A Fear That The
Company She Has Invested In Might Go Bankrupt.
(c) A Potential Shareholder Thinking About Purchasing Shares In A Company
And Interested In Determining If The Company Is Profitable.
Examples Of Business Decisions Requiring The Use Of Management Accounting Data Include:
(a) Determining Whether Accounts Are Being Collected On Time.
(b) Determining Whether The Business Will Have Sufficient Cash Over The Next
Year To Avoid The Need To Arrange A Line Of Credit.
(c) Determining Whether A Drinks Vending Machine Or A Confectionary
Vending Machine Should Be Installed In A Hotel’s Foyer Area.
(d) Determining What Room Rate To Charge To Achieve A Target Level Of Profit.
(e) Determining Whether A Seasonal Hotel Should Be Closed Down During The
Quiet Season.
(f) Determining Whether A Restaurant Manager Is Performing Well.



Problem 1.4: Solution
a) High Product Perishability Signifies That An Item Cannot Be Held In Inventory For Sale
At A Later Time. Food Items Have A Limited Life In Inventory Because Of Their Rapid
Physical Deterioration. Room Nights And Conference Facilities Cannot Be Placed In
Inventory Because They Relate To A Particular Time Period That Expires.

b) The Absolute Perishability Of Rooms, Conference And Banquet Facilities And The
Relative Perishability Of Food Underlines The Importance Of Accurate Hotel Demand
Forecasting As Part Of The Budgeting Process. Generally, The Most Important Aspect Of
Forecasting Is Room Occupancy, As Room Sales Drive Sales Levels Of Other Hotel
Services. Accurate Restaurant Forecasting Provides The Basis For Maintaining A Full Menu
Of Options While Also Minimising The Cost Of Food Wastage.


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, Accounting Essentials for Hospitality Managers (C. Guilding) Solutions




Problem 1.5: Solution
Fixed Costs Are Costs That Do Not Vary As A Function Of Sales Activity Levels. Hotels
Involve Considerable Investment In Fixed Assets Such As Buildings On Prime Land As Well
As Extensive Furnishings, Fittings And Equipment. This Investment Generates High Rent
And Depreciation Costs, Which Together With Significant Salary Costs, Result In A High
Fixed Cost Structure For Hotels.


Problem 1.6: Solution
a) Major Hotel Activities Include Room Housekeeping, Restaurant Food Preparation And
Service As Well As Bar Service. Despite The Advent Of The Machine And Computer Age,
The Physical Aspect Of All Of These Activities Has Changed Little Over The Last Fifty
Years, As They Continue To Have A High Labour Component.

b) High Labour Intensive Activities In Hotels Signifies The Importance Of Performance
Measures That Focus On Labour Productivity. Such Performance Indices Include Restaurant
Covers Per Employee Hour Worked And Restaurant Sales Per Employee Hour Worked.
Monitoring Differences Between Actual Labour Cost And Budgeted Labour Cost Represents
Another Dimension Of Labour Cost Management. An Appropriate Analysis Of The
Difference Between Budgeted And Actual Labour Cost Enables A Distinction To Be Drawn
Between Labour Rate And Labour Efficiency Factors.


Problem 1.7: Solution
Financial Accounting Concerns The Preparation Of Financial Reports For External Users
Such As Shareholders, Banks And Government Authorities. In Order For These Financial
Reports To Be Meaningful, It Is Important That They Are Produced In A Standardised Way
And Are Seen To Be Reliable. Management Accounting Concerns The Provision Of
Financial Information To Internal Management. This Information Is Designed To Help
Managers In Their Decision Making And Control Of Businesses. Financial Information
Sought By Hotel Managers Includes Determining The Cost Of Providing A Meal To Inform
The Menu Pricing Decision, Determining How Many Delegates Need To Attend A
Conference In Order To Achieve Break Even, And Determining What Level Of Profit Is
Made By Each Selling Unit Of A Hotel To Inform Any Rationalisation Decision To Drop A
Unit. The Provision Of All These Types Of Financial Information Falls Within The Scope
Of Management Accounting.


Problem 1.8: Solution
The Main Accounting Information Users Are:
• Managers Within The Company Being Accounted For. Managers Use
Accounting Information In Planning And Controlling Business Activities.

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